EPA v. EME Homer City Generation

Issues

Consolidated with American Lung Association v. EME Home City Generation (12-1183).

Did the EPA permissibly interpret the phrase “contribute significantly” when it balanced achievable emission reduction levels against the cost of achieving such emission reductions?

Can states wait for the EPA to adopt a rule quantifying each state’s “good neighbor” obligations before they adopt a state implementation plan prohibiting emissions that “contribute significantly” to other states’ pollution problems?

In 1963, in response to growing concerns of pollution, Congress passed the Clean Air Act (CAA). The CAA requires the Environmental Protection Agency (EPA) to set certain air quality standards for harmful pollutants, and includes a “Good Neighbor” provision requiring states to adopt plans that prohibit pollution that would “contribute significantly” to other states’ nonattainment of these standards. However, the CAA does not define “significant contribution.” In 2011, the EPA finalized a rule known as the “Transport Rule.” Mirroring the language of the “good neighbor” provision, the Transport Rule defines emission reduction obligations for several upwind states that “contribute significantly” to downwind states’ nonattainment of the EPA’s air quality standards. In determining what constitutes a significant contribution, the EPA balanced achievable emission reductions against the cost of achieving those reductions. However, in EME Homer City Generations v. EPA, the D.C. Circuit struck down the Transport Rule and rejected the EPA’s analysis for determining what constitutes a significant contribution in this context. These two cases present the Supreme Court with questions about the EPA’s interpretation of its statutory grant of authority under the CAA as well as questions about the jurisdiction of the D.C. Circuit to hear the challenges presented. This case also raises concerns about federal intervention in state affairs and public health concerns posed by the EPA’s interpretation of the CAA. Should the Supreme Court decide this case on the merits, the Court’s decision will significantly affect the EPA’s grant of authority to regulate interstate pollution.

Questions as Framed for the Court by the Parties

EPA V. EME HOMER CITY GENERATION

The Clean Air Act, 42 U.S.C. 7401 et seq. (Act of CAA), requires the Environmental Protection Agency (EPA) to establish National Ambient Air Quality Standards (NAAQS) for particular pollutants at levels that will protect the public health and welfare. 42 U.S.C. 7408, 7409. “[W]ithin 3 years” of promulgation of a [NAAQS],” each State must adopt a state implementation plan (SIP) with “adequate provisions” that will, inter alia, “prohibit[]” pollution that will “contribute significantly” to other States’ inability to meet, or maintain compliance with, the NAAQS. 42 U.S.C. 7410(a)(1), (2)(D)(i)(I). If a State fails to submit a SIP or submits an inadequate one, the EPA must enter an order so finding. 42 U.S.C. 7410(k). After the EPA does so, it “shall promulgate a [f]ederal implementation plan” for that State within two years. 42 U.S.C. 7410(c)(1).

The questions presented are as follows:

Whether the court of appeals lacked jurisdiction to consider the challenges on which it granted relief.

Whether States are excused from adopting SIPs prohibiting emissions that “contribute significantly” to air pollution problems in other States until after the EPA has adopted a rule quantifying each State’s interstate pollution obligations.

Whether the EPA permissibly interpreted the statutory term “contribute significantly” so as to define each upwind State’s “significant” interstate air pollution contributions in light of the cost-effective emission reductions it can make to improve air quality in polluted downwind areas, or whether the Act instead unambiguously requires the EPA to consider only each upwind State’s physically proportionate responsibility for each downwind air quality problem.

American Lung Association v. EME Home City Generation (12-1183)

QUESTIONS PRESENTED:

The Clean Air Act’s “Good Neighbor” provision requires that state implementation plans contain “adequate” provisions prohibiting emissions that will “contribute significantly” to another state’s nonattainment of health-based air quality standards. 42 U.S.C. 7410(a)(2)(D)(i). A divided D.C. Circuit panel invalidated, as contrary to statute, a major EPA regulation, the Transport Rule, that gives effect to the provision and requires 27 states to reduce emissions that contribute to downwind states’ inability to attain or maintain air quality standards. The questions presented are:

Whether the statutory challenges to EPA’s methodology for defining upwind states’ “significant contributions” were properly before the court, given the failure of anyone to raise these objections at all, let alone with the requisite “reasonable specificity,” “during the period for public comment,” 42 U.S.C. 7607(d)(7)(B);

Whether the court’s imposition of its own detailed methodology for implementing the Good Neighbor provision violated foundational principles governing judicial review of administrative decision-making;

Whether an upwind state that is polluting a downwind state is free of any obligations under the Good Neighbor provision unless and until EPA has quantified the upwind state’s contribution to downwind states’ air pollution problems.

Facts

In passing the Clean Air Act, Congress empowered the Environmental Protection Agency (EPA) to set National Ambient Air Quality Standards (NAAQS), the maximum permissible levels of common pollutants released into the air. See EME Homer City Generation v. EPA, 696 F.3d 7, 12 (D.C. Cir. 2012). In addition to setting these standards, the EPA designates “nonattainment” areas, which are areas within each state that have failed to comply with the NAAQS. See id. at 13. States, not the EPA, then assume the role of determining how to comply with the NAAQS. See id. Within three years of each new or revised NAAQS issued by Congress, states must submit State Implementation Plans (SIPs) to the EPA detailing how they will comply with the new standards. See id.If a state fails to implement a SIP or does so inadequately, the EPA must develop a Federal Implementation Plan (FIP) to implement the NAAQS within that state. See id.

The Clean Air Act’s “good neighbor” provision attempts to control pollution produced by “upwind” states that travels through the atmosphere to pollute “downwind” regions. See id.Thus, under the good neighbor provision, upwind states are responsible for managing the pollution they emit into the downwind state’s atmosphere. See id.The EPA plays a critical role in quantifying the amount of air pollution that exists in the downwind state’s atmosphere and how much of that pollution originates in the upwind state. See id. After the EPA makes such calculations, the upwind state can then determine how it will meet its good neighbor obligation. See id.

The good neighbor provision resulted in numerous lawsuits challenging the validity of the provision and the EPA’s attempts to implement it. See id.at 14. In August 2011, the EPA responded to court orders to modify the provision by finalizing the Transport Rule. See id.at 15.The Transport Rule defines and calculates twenty-eight upwind states’ contributions to downwind states’ air pollution problems and discusses their responsibilities to reduce that pollution. See id. at 11. The Rule limits emissions from coal- and natural gas-fired power plants operating in these upwind states (which generate the majority of the country’s electricity). See id.

After the EPA finalized the Transport Rule in August 2011, various power companies, coal companies, labor unions, trade associations, states, and local governments petitioned the D.C. Circuit for review. See id.at 19. In particular, they argued that the Transport Rule exceeds the EPA’s authority under the Clean Air Act to order upwind states to reduce pollution that significantly contributes to nonattainment in downwind States. See id. On December 30, 2011, the D.C. Circuit issued an order granting the petitioners’ motion to stay the Rule pending the court’s decision on the merits. See id. On August 21, 2012, the D.C. Circuit held that the Transport Rule exceeded the EPA’s authority under the good neighbor provision and that the EPA may not issue a FIP without giving states ample opportunity to implement the required reductions through SIPs. See id. at 11–12. The Supreme Court granted certiorari and consolidated the cases.

FEDERALISM PRINCIPLES

Petitioner the American Lung Association argues that Transport Rule fosters principles of cooperative federalism in the regulation of air pollution. SeeBrief for Petitioners, American Lung Association et al. at 63–64. The Constitutional Accountability Center (CAC) supports that argument, contending that the federal government possesses the authority to regulate problems that implicate national interests and that cross state lines, such as air pollution. See Brief for Amicus Curiae Constitutional Accountability Center in Support of Petitioners at 11. CAC reasons that federal intervention is necessary because without it, upwind states would have little incentive to discourage activities that creates pollution that travels downwind. See id. at 12. CAC describes the Transport Rule as a proper example of the federal government complying with its constitutional mandate of making laws that address complex interstate problems that cross state lines while simultaneously respecting the role of the states. See id.at 20.

The State and Local Respondents, however, maintain that the Transport Rule empowers the EPA to assume power to regulate pollution that the Clean Air Act intended for the states. See Brief for the State and Local Respondents at 56. They maintain that the Transport Rule renders the SIP meaningless because the EPA discloses to upwind states how much air pollution they are emitting into downwind states’ atmospheres at the same moment that the EPA enacts its FIP. See id.Thus, the State and Local Respondents argue that the Transport Rule thwarts any opportunity states may have to implement their own solutions by submitting SIPs. See id.at 57. Furthermore, the State and Local Respondents point out that prior to enacting the Transport Rule, the EPA enacted rules on two separate occasions that gave states, not the EPA, the first opportunity to implement good-neighbor obligations. See id.at 60. With the Transport Rule, the EPA decided to completely depart from its previous practices without acknowledgment or explaining why it was not following them. See id. at 60.

APPROPRIATE CONTROL OF AIR POLLUTION

The American Thoracic Society (ATS) supports the Transport Rule, arguing that significant health benefits will result from its implementation. See Brief of Amicus Curiae American Thoracic Society in Support of Petitioners at 19. The ATS cites studies predicting that the Transport Rule could prevent between 13,000 and 34,000 premature deaths each year. See id. at 21. The Transport Rule, the ATS maintains, is particularly attractive because its implementation could save between 2,550 and 6,560 more lives than any previous rule imposed by the EPA attempting to limit interstate pollution. See id.

The Industry and Labor Respondents argue that the obligations of upwind states under the Transport Rule do not appropriately curb air pollution. See Brief of Industry and Labor Respondents at 18. They maintain that the Rule has led to overcontrol of air pollution emissions in numerous instances. See id. at 19. For instance, they assert, under the Transport Rule emissions from Maryland and New Jersey were linked to nonattainment in cities in Connecticut, even though the air quality in those cities was superior to NAAQS levels. See id.The Industry and Labor Respondents dispute the validity of the EPA’s contention that overcontrolling air pollution emissions is necessary to avoid the risk of undercontrol. See id. at 20. They contend that such overcontrol is prohibited because it has the potential to regulate states that are in no way linked to the nonattainment areas. See id.Thus, the Industry and Labor Respondents argue that the obligations some upwind states face under the Transport Rule do not appropriately curtail air pollution. See id.

A group of atmospheric scientists and air quality modeling experts (“Atmospheric Scientists”) argue that the Transport Rule is a practical and scientifically reasonable way to curb interstate air pollution. See Brief of Amici Curiae Atmospheric Scientists and Air Quality Modeling Experts in Support of Petitioners at 16. The Atmospheric Scientists discuss the complex nature of the interstate transport of air pollutants and the models used to simulate that phenomenon. See id.at 13–14. They maintain that the complex nature of interstate transport of air pollutants makes it difficult to develop an effective rule in light of the lower court’s “overly simplistic view” of the transport system. See id.at 22. A group of electrical engineers, economists, and physicists who specialize in the study of electricity is also critical of the D.C. Circuit’s decision. See Brief for Amici Curiae Benjamin F. Hobbs et al. in Support of Petitioners at 24. That group describes the highly regional and interconnected nature of the country’s electricity industry. See id. at 20. This very interconnected electrical network, they contend, is at odds with rigid state-by-state approach adopted by the D.C. Circuit, making it difficult for the EPA to adequately address the problem of air pollution. See id.at 26–27.

Analysis

This case presents the Supreme Court with questions pertaining to the permissibility of the EPA’s approach, which balanced achievable levels of emission reductions against the cost of achieving those reductions. The Federal Petitioners argue that the D.C. Circuit had no authority to review the EPA’s actions in this case and that the EPA had authority to use a cost-efficiency approach in formulating regulations. See Brief for Federal Petitioners at 18, 43. The State and Local Respondents argue that the D.C. Circuit had jurisdiction here, that there must be some judicially enforceable limit on the EPA’s authority to regulate, and that Petitioners’ approach fails to impose any such limit. See Brief for State and Local Respondents at 17, 45.

AUTHORITY TO REVIEW THE EPA’S DETERMINATIONS

The Federal Petitioners argue that the D.C. Circuit exceeded the scope of its authority by adjudicating claims that were not properly before it. See Brief for Federal Petitioners at 18. In furtherance of this argument, the Federal Petitioners distinguish the EPA’s SIP determinations and the EPA’s determinations as to each state’s emission reduction obligations under the Transport Rule. See id.at 20. According to the Federal Petitioners, the D.C. Circuit lacked jurisdiction to simultaneously consider challenges to both sets of determinations. See id. With respect to the EPA’s SIP determinations, the Federal Petitioners argue that the EPA undertook a separate, judicially reviewable proceeding for each state. See id. According to the Federal Petitioners, Respondents needed to challenge those actions within sixty days of their publication, and that they failed to do so. See id.at 21. Federal Petitioners argue that the D.C. Circuit therefore lacked jurisdiction to hear challenges to the EPA’s SIP determinations. See id.at 20.

The State and Local Respondents counter that the states are only challenging the EPA’s imposition of FIPs under the Transport Rule. See Brief for State and Local Respondents at 19. They reject the EPA’s allegation that the challenge to the Transport Rule is really a challenge to the EPA’s SIP determination, citing three main reasons. First, a finding that the Transport Rule exceeds the EPA’s statutory grant of authority does not require a finding that the EPA’s prior SIP disapprovals were unlawful. See id. Second, even if a finding that the EPA’s prior SIP disapprovals were unlawful is implied in a finding that the Transport Rule exceeds the EPA’s statutory grant of authority, this still would not present jurisdictional problems because Respondents do not seek a remedy for the EPA’s SIP disapprovals. See id. at 21. Third, the EPA’s authority to impose a FIP on a state expires once the EPA approves that state’s SIP, and the EPA’s argument does not address the fact that it had previously approved many of these states’ SIPs. See id. at 22–23. Moreover, the State and Local Respondents argue that the EPA’s determinations are intertwined and cannot be considered separately because each state’s good neighbor obligations are affected by emission reduction obligations imposed on other states. See id. at 23. Therefore, according to the State and Local Respondents, if the EPA imposes stricter FIPs on certain states, this will necessarily affect the air quality in other states and allow states with more lenient FIPs to emit more pollution without cost or penalty. See id.

THE EPA’S APPROACH TO DEFINING “SIGNIFICANT” CONTRIBUTIONS

The Federal Petitioners argue that the D.C. Circuit erred in invalidating the EPA’s cost-efficiency analysis approach because agencies are only barred from considering costs where it is clear Congress intended that costs not be considered. See Brief for Federal Petitioners at 43. According to the Federal Petitioners, the language of the good neighbor provision is ambiguous with respect to Congress’s intent, and therefore the EPA’s interpretation is entitled to deference by the Court under the rule of Chevron v. NRDC. See id.at 45. The Federal Petitioners note that the EPA has always permitted an assessment of costs in determining what constitutes a “significant” contribution, and the D.C. Circuit has previously upheld the EPA’s approach under similar circumstances. See id.at 42–43.

The State and Local Respondents counter that Federal Petitioners’ argument is flawed because it does not recognize any judicially enforceable limits on the EPA’s authority to impose FIPs. See Brief for State and Local Respondentsat 45. According to the State and Local Respondents, the EPA’s authority to impose FIPs must somehow be limited, and the text of the CAA limits the EPA’s authority in two ways: (1) FIP obligations cannot exceed a state’s SIP obligations; and (2) the EPA cannot use FIPs to impose good neighbor obligations that did not exist when the EPA disapproved that state’s SIP. See id. at 46, 49. The State and Local Respondents argue that the EPA’s FIP authority must be limited to correcting the deficiencies that triggered the EPA’s disapproval of a SIP, and that the EPA cannot conceal what constitutes a deficiency until after it is too late for states to correct such deficiencies. See id. at 48, 55. Therefore, according to the State and Local Respondents, the EPA must rely on something more than Chevron deference in order to support the Transport Rule. See id. at 44.

WAS ISSUANCE OF FEDERAL IMPLEMENTATION PLANS PREMATURE?

According to the State and Local Respondents, the CAA requires the EPA to notify states of inadequacies in their SIPs and provide a reasonable opportunity for states to fix those inadequacies. See id.at 31. They assert that the states subject to the Transport Rule had no way of predicting their good neighbor obligations under the complex cost-efficiency analysis that the EPA eventually used to determine what constitutes a “significant” contribution. See id. at 49–50. Accordingly, the State and Local Respondents argue that states have no obligation under the CAA to implement SIPs reflecting the EPA’s cost-efficiency analysis until after the EPA quantifies each state’s “significant” contribution. See id. at 54.

The Federal Petitioners counter that the states had ample opportunity to object or comment to the EPA’s proposed approach when the EPA’s gave notice of the proposed rulemaking. See Brief for Federal Petitioners at 39–40. According to the Federal Petitioners, nothing in the CAA excuses a state from complying with an approach that the EPA tentatively adopts during a rulemaking. See id. at 39. The Federal Petitioners argue that to hold otherwise would diminish the importance of interested parties’ active participation in the notice-and-comment period afforded by the formal rulemaking. See id.at 39–40.

Conclusion

The Supreme Court will consider the scope of the EPA’s authority to regulate interstate air pollution. This case presents several questions relating to the EPA’s statutory interpretation of the CAA, including whether the EPA permissibly interpreted the phrase “contribute significantly” and whether the D.C. Circuit had jurisdiction to hear the challenges. The decision of the Court may impact the federal-state balance in formulating future environmental regulations, and will have significant public health and environmental consequences.